In commodities trading, what does the term volatility refer to?

Volatility in commodities trading refers specifically to the degree of variation in trading prices over a given period. It acts as a statistical measure of how much prices fluctuate, highlighting the uncertainty and risk associated with the price movements of commodities. When volatility is high, it indicates that prices can change dramatically within short periods, which can be both an opportunity and a challenge for traders. Understanding volatility is essential for making informed trading decisions and managing risk effectively.

The other choices do not accurately capture the essence of volatility. Profit margins relate to the difference between revenue and costs, rather than price changes. A trading strategy refers to a planned approach to buying and selling commodities, while sourcing commodities is about the procurement process, both of which do not define the concept of price fluctuations that volatility represents.